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WheelsOfGrace.com | Volume 12 Issue 2 | 23 HOLD FOR HARLEY-DAVIDSON? By Mike from Riding with the Ozarks Second: As it was mentioned during the call that new products may not be released in quarter one. Quarter one launch is for existing models primarily, and new products may release in different quarters, so don't expect to see that Pan America on a dealership floor near you in quarter one. Third: The last section of this slide talked about parts and accessories and general merchandise. They did mention a 15% SKU reduction in parts and accessories that sparked my interest. It's one of the things Harley is known for, being highly customizable, and now we're talking about reducing the number of accessories that are available, but considering the outstanding after market support from other vendors I'm really not worried about that at all. This whole general marketing focusing on the most profitable SKU to me that says we want to sell you more hats and t-shirts. Now let's review, and see what all this really means to the every day customers. First they say reduce gap between new and used. That doesn't mean lower prices on new bikes but what it actually means is higher prices on used bikes. You can take this two different ways: it's either going to cost you more to buy a used Harley you're going to get more trade in value out of your used Harley or more cash if you're selling your bike outright. I'm not going to say this is actually a good or bad thing because it all depends on what perspective you're coming from as an existing customer and whether you're buying, selling or trading. But I think there's a purpose behind this and that's to truly encourage customers to buy new bikes over used bikes because there is not that much difference in price. Now I think there's some secret sauce in this formula that's going to drive profits at Harley- Davidson and I'm going to share that with you. Many of us heard that Harley-Davidson dealers were buying up used bikes this summer. The initial thought was just because inventory was down due to the factory being closed, DUE TO COVID, and they didn't want to have empty space on the floor when people came in to shop, but I think there is a little more to that. If you look at the ads Harley dealers were running, they were offering up to 130% of NADA on any used bikes traded in on a new in stock Harley-Davidson. Now one of the key points of the call that was mentioned several times was managing their inventory. We know they shipped less inventory than what they were selling, so that means they're dipping in to the existing inventory that was already on the floor to some degree. And we all know how supply and demand works so let's think about this. Let's look at financing. The H-D financial segment represents about 17% of the company's revenue. And if my math is right, and you look at the income it represents, 65% of the operating income from something that is only 17% of the revenue that says profit to me. Do you follow? I don't know about you but you know I heard of a time once a long long time ago where you had to sign up on a waiting list to buy a new Harley and used bikes cost almost as much new bikes. Do you think we can see that again in the future? Well I hope it doesn't get to that point but I do see them driving up the price of used bikes. A couple of others things that they did was, they did not touch on the earnings but, they discussed spinning off e-bikes into a new company under a different name (we see that happening with Serial 1 e-bikes) but they are going to say powered by Harley- Davidson. I'm not just talking about the little e-bikes that they've been selling in the dealership but actual e-bicycles. They also mentioned in the call that they reduced they're global dealer network by 4%. I see a new dealership that's getting ready to open up just 60 miles from me they should be opening any day now one thing that's kind of surprising is it's only 30 or 40 miles from their sister dealership I don't know how they got that approved when the company is reducing their dealer network. Oh, and one other important thing to mention, is they did not talk about the recent Harley-Davidson Livewire recall… you know the electric motorcycle from Harley-Davidson, that live wire! WheelsOfGrace.com | Volume 12 Issue 2 | 23